Light Reading

Lucent Ditches Chromatis

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News Analysis
Light Reading
8/28/2001
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Lucent Technologies Inc. (NYSE: LU) has confirmed the closure of Chromatis Networks, the wavelength-division multiplexing startup it purchased in May 2000 for $4.5 billion (see Lucent Catches Chromatis).

The closure involves the layoff of about 150 employees, Lucent says. Most of these are R&D folk located at Chromatis's former headquarters in Petah Tikva, Israel, but a handful of engineers also have been let go at Lucent facilities in Herndon, Va. The company hasn't said whether any closure of buildings or offices will accompany the layoffs.

Lucent plans to discontinue its line of Metropolis MSX gear, which came from Chromatis. The company's other DWDM and next-generation Sonet platforms will continue to be sold under the Metropolis brand.

"This is part of our Phase II restructuring effort. We're resetting our priorities and making difficult decisions in order to focus our efforts on our largest service-provider customers," says Lucent spokesman Frank Briamonte.

The world's largest carriers are still buying telecom products despite the slowdown, but they weren't buying the Chromatis products, Briamonte says.

The news has been greeted by investors as yet another step in the right direction for Lucent, which in the past few weeks has managed to rework its credit agreements, launch a successful bond offer, and garner cautiously positive ratings from influential analysts (see Levy's Lucent Call Boosts Stock, Lucent Boosted by Bond Offering, and Lucent Breaks Through on Covenants). As this went to press, Lucent's shares were trading at $7.48, up 0.15 (2.05%).

Today's news is no surprise to anyone familiar with the long, sad saga of the Lucent/Chromatis relationship. Indeed, the deal has become a textbook example of how mergers and acquisitions were misguided and mismanaged under the executive team led by ousted CEO Rich McGinn.

A variety of sources say Lucent's biggest misstep wasn't buying Chromatis, which already had a metro WDM product ready to hand. The trouble arose when Lucent tried to integrate the box with in-house gear -- and with another recently acquired metro box from Ignitus Communications LLC (see Lucent Ignites ATM).

Months later, the integration effort had yielded little more than questions, arguments, and even lawsuits (see Tales of Lucent: Readers Respond and Lucent, Chromatis & Ignitus: A True Tale?). After awhile, Lucent quietly put the brakes on the Ignitus effort and seemed intent on making a go of the Chromatis wares.

But to little avail. Lucent had already lost significant ground in the metro market, and by early 2001 Lucent folded its Metropolitan Optical Networking unit back into the overall Optical Networking division. Bob Barron, the former CEO of Chromatis, left Lucent in April (see Lucent Metro Boss Leaves) and appears to be heading into a new job soon (see LightCross Taps Former Chromatis CEO).

Other Chromatis veterans say they have no regrets. "It is a very unfortunate situation, but the bottom line is that I understand Lucent's decision from a business perspective," says Doug Green, former VP of marketing at Chromatis and presently VP of marketing at Ocular Networks Inc. "Lucent is trying to restructure to be more efficient, and they had in Chromatis a standalone, single product laboratory in Israel."

He says one could argue a lot of reasons why the Chromatis product never took off, including the many Lucent reorganizations that took place during the product's tenure, as well as Chromatis's dependency on multiple technologies: "The market is moving away from 'god boxes' and the Chromatis product certainly depended a lot on the value of integrating DWDM, ATM, and TDM."

Lucent says it's holding onto the intellectual property it acquired with Chromatis and has no plans to sell it at this point.

— Mary Jander, Senior Editor, Light Reading
http://www.lightreading.com

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Dr. Joe
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Dr. Joe,
User Rank: Light Beer
12/5/2012 | 12:13:34 AM
re: Lucent Ditches Chromatis
Dear Mike:

Neptec should be investigated by the Attorney General's Offices of Texas, New York, California, and Tennesse concerning thier unfair business pratices and theft of trade secrets.

This company can not be trusted and when will the customers, suppliers, and investment firms wake up to these type of behaviors.

They are the Enrons of the Fiber Optic Market.

The Carmack
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The Carmack,
User Rank: Light Beer
12/4/2012 | 7:54:13 PM
re: Lucent Ditches Chromatis
Today's news is no surprise to anyone familiar with the long, sad saga of the Lucent/Chromatis relationship. Indeed, the deal has become a textbook example of how mergers and acquisitions were misguided and mismanaged under the executive team led by ousted CEO Rich McGinn.

OUCH!!!
lmtis
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lmtis,
User Rank: Light Beer
12/4/2012 | 7:54:12 PM
re: Lucent Ditches Chromatis
Spend $4.75B, can your competing product lines, and then can Chromatis. My LU stock isn't looking like a very good deal is it?
Twistall
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Twistall,
User Rank: Light Beer
12/4/2012 | 7:54:11 PM
re: Lucent Ditches Chromatis
A variety of sources say Lucent's biggest misstep wasn't buying Chromatis, which already had a metro WDM product ready to hand. The trouble arose when Lucent tried to integrate the box with in-house gear

If by "ready to hand" one means "designed without manufacturing in mind" and "will run given a large staff of software engineers standing by to patch over the hiccups" then the article is correct.

And as far as integration with in-house gear goes, I don't think they ever got that far.

Bottom line: Lucent bought Chromatis thinking it had a product ready for customer trials, and apparently, it wasn't.
stuartb
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stuartb,
User Rank: Light Beer
12/4/2012 | 7:54:09 PM
re: Lucent Ditches Chromatis
Doug Green from seems to be shooting himself in the foot with his quote:

"The market is moving away from 'god boxes' and the Chromatis product certainly depended a lot on the value of integrating DWDM, ATM, and TDM."

It looks to me as if the Ocular product is attempting to integrate DWDM, ATM, TDM and IP...a Zeus to Chromatis' Apollo.

-Stu
ivehadit
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ivehadit,
User Rank: Light Beer
12/4/2012 | 7:54:08 PM
re: Lucent Ditches Chromatis
i forgot to add: an excellently researched article. it had its facts right.
ivehadit
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ivehadit,
User Rank: Light Beer
12/4/2012 | 7:54:08 PM
re: Lucent Ditches Chromatis
integrating atm, tdm, and dwdm. that says cost, cost, cost.

there's no atm in metro, no god-box dwdm requirement. seems like the wrong product for the times.

johnjohn
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johnjohn,
User Rank: Light Beer
12/4/2012 | 7:54:05 PM
re: Lucent Ditches Chromatis
as a result of the mishandling of this acquisition, lucent lost some much needed infusion of entreprenuerial spirit that barron brought to the table. combine that with the fact that jeong kim is gone and lucent is becoming stale at the top ranks
tiredofit
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tiredofit,
User Rank: Light Beer
12/4/2012 | 7:54:05 PM
re: Lucent Ditches Chromatis
My LU stock isn't looking like a very good deal is it?

And it hasn't for about a year. You just wake up Rip Van Winkle?
donethat
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donethat,
User Rank: Light Beer
12/4/2012 | 7:54:03 PM
re: Lucent Ditches Chromatis
..Of the $5B acquisition, I really have to wonder how much Lucent thinks the IP is worth?? Is the value knowing what doesn't work??
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